Google, Sergey and 23andMe: Why it all makes sense

There is a good deal of buzz in the tech-news world about a $3.9 million investment that Google has made in a company called 23andMe, a startup in hiring mode with dreams of “helping consumers understand and browse their genome”.

$3.9 million? What’s the big deal about a company that Google is investing less than 1/750th the cash is put out to buy DoubleClick? As Eric Schmidt has pointed out, Google buys companies with “1-2-3 people and you never, never hear about them.”

The big deal is this: Anne Wojcicki, who is a co-founder of 23andMe and who is also a shareholder and member of the board of directors, is married to Sergey Brin, Google’s President, Technology and one of its founders. Sergey also holds approximately 35% of Google’s Class B common stock.”

Oh, and some of that $3.9 million is going to pay back a $2.6 million loan that Brin made to 23andMe. Also, another participant in the round of investment is Genentech, whose CEO Arthur Levinson also sits on Google’s board.

All of which has prompted some bloggers to proclaim this “an obvious conflict of interest“. After all, this is all coming to light mere days after Brin broke so many hearts by marrying Wojcicki.

Okay, but hold on. A case could be made that there is a good reason for Google to make this deal. And although I realize I may end up regretting it, I am going to make that case.

The conflict-of-interest theory holds that Google was not only willing to breach business ethics, but defiantly disclosed it in an SEC filing. And that Brin was so intent on getting this deal done that he managed to get Levinson and his company, not to mention two top VC firms (Mohr Davidow and New Enterprise Associates) to join him in his lapse of integrity.

That’s a lot of intelligence to vanish all at the same time, on the same deal. There is a lot of crazy thinking in Silicon Valley these days, but not that crazy.

Marital bliss aside, does the deal make sense? The first thing I thought of when I read about is was another deal: Microsoft’s purchase of health-care search engine Medstory in February. It was the latest of small, quiet buys Microsoft has made to get a footing in the market for consumer-oriented health-care information. Microsoft sees a big market there one day, and an investment in 23andMe lets Google chart yet another collision course with Microsoft’s ambitions.

It’s also interesting to see Google and Genentech collaborating on a deal. Both have been innovative leaders in their respective industries, and this investment could signal that they see a rekindling in bioinformatics years after the initial buzz surrounding genomics fizzled away.

Finally, I’ve been poking around only a little bit, but I haven’t yet found a company that gives Google a better entry into a genomics-for-consumers startup. There is Family Tree DNA but it’s focused more on genealogy than health. And 454 Life Sciences which is geared more toward companies than consumers, and SNPedia more of a resource than a service.

That’s far from an exhaustive list, and if anyone can find a more deserving vehicle in this niche for Google’s money, please leave your comments below.

Whatever conflicts there may appear in this deal, it’s a far cry from a $2 million birthday party for Mrs. Kozlowski. If Google wants to really organize the world information, it needs to consider DNA, the most personal of data. And what 23andMe is purporting to sell is the ultimate in navel gazing.